Aluminium prices have approached four-year highs following Middle East aluminium smelter cuts due to Alba and Al Taweelah smelter attacks. Given the strait of Hormuz remains closed, this risk of further cuts in the region means $4,000 /t appears increasingly likely even with the growing threat of demand destruction.
EGA and Alba both suffer attacks to their facilities
On Saturday 28, March both EGA and Alba were hit by Iranian strikes, heightening fears of prolonged and more severe supply disruptions for aluminium.
EGA issued a statement on Saturday saying that its Al Taweelah site sustained “significant damage” during Iranian missile and drone attacks at Khalifa Economic Zone Abu Dhabi. The producer added that a number of EGA employees were injured, but none of the injuries were life threatening. Abdulnasser Bin Kalban, CEO of EGA, declared: “The safety and security of our people is our top priority at EGA at all times. We are deeply saddened and are assessing the damage to our facilities.” The company also said that it had “substantial metal stock” on the water when the conflict began, and also stock on the ground in some overseas locations.
Alba was also subject to an Iranian attack on the same day . The producer said in a website statement that two employees sustained minor injuries. The company also mentioned it was assessing the extent of the damage to its facilities but did not provide further details. Alba added that its focus was on “maintaining its operational resilience and the safety of its employees”. This appears to follow strikes on Iranian steel mills on Friday 27 March.
Both EGA and Alba are key regional exporters of primary aluminium. Combined capacity is ~4.3 Mt/y, equivalent to ~70% of GCC aluminium smelting capacity. EGAs operates two primary smelters and one alumina refinery in the United Arab Emirates (UAE). Namely, the formerly EMAL (now called Al Taweelah smelter) with a nameplate capacity of ~1.5 Mt/y; the Al Taweelah alumina refinery with a capacity of ~2.0 Mt/y; and the Jebel Ali (formerly DUBAL) smelter in Dubai with a capacity of ~1.2 Mt/y. Both smelters were operating at full utilisation. EGA is known as the biggest producer in the region, while Alba is the biggest single-site producer outside China. Earlier in March, Alba initiated a controlled shutdown of its reduction Lines 1, 2 and 3, representing 19% (~311 kty) of its total capacity, due to transit disruptions affecting the Strait of Hormuz.
Until the extent of the damage is fully assessed it is too early to assess the volumes that will be lost. Purely from a theoretical perspective, and acknowledging the uncertainty at this time, CRU estimates that curtailment at EGA’s Al Taweelah smelter could elicit up to a 1.2 Mt cut to 2026 production, compared to 2025. This assumes no restart in 2026.
What is the current impact of the conflict on primary aluminium production?
In addition to the aforementioned impacts in the UAE and Bahrain, the Qatalum smelter in Qatar is operating at 60% utilisation (390 kt/y) due to a reduced gas supply from energy provider QatarEnergy.
CRU also understands that the Bandar Abbas smelter in Iran is being curtailed and the Arak smelter is impacted. CRU assumes the closure of two potlines at this time.
This occurs at time when there is already tightness in the aluminium market, following the Mozal smelter in Mozambique entering care and maintenance in mid-March. Furthermore, this puts additional pressure on the global PFA and billet markets.
The GCC is a key VAP supplier to the world
The GCC are also among the largest exporters of value added products (VAPs)in the global market and remain key suppliers to both Europe and the US. The loss of these import volumes could significantly affect VAP upcharges and premiums in both regions.
In 2025, GCC producers accounted for 61% of total US billet imports, 39% of total PFA imports, and only 6% of slab imports. Qatar’s exports to the EU 27 and the US are relatively limited, implying only a marginal impact on VAP premiums and upcharges. In contrast, Bahrain and the UAE are major exporters to the key markets of the US, Western Europe, Japan, South Korea and Southeast Asia. In 2025, almost two thirds of EGA Al-Taweelah’s and Alba’s smelters’ production was in VAPs, highlighting the importance of VAP production for both assets.
Qatar’s exports to the EU 27 and the US are relatively limited, implying only a marginal impact on VAP premiums and upcharges. In contrast, Bahrain and the UAE are major exporters to the key markets of the US, Western Europe, Japan, South Korea and Southeast Asia. In 2025, almost two thirds of EGA Al-Taweelah’s and Alba’s smelters’ production was in VAPs, highlighting the importance of VAP production for both assets.
The chart below, using data from our Aluminium Casthouse Market Service, showcases VAP production by smelter in the Middle East.
What could further disrupt aluminium supply from the region?
The Strait of Hormuz blockage remains a key threat to trade flows in the region, with limited alternatives to move metal and, importantly, raw materials over land or via alternative ports in the region. Limited volumes of oil are being exported via the Red Sea and EGA was reportedly moving metal via Oman. Further strikes on key infrastructure such as ports and power remain a key threat if the conflict continues.
Middle East aluminium smelter cuts likely to be greater than demand cuts, at least for now
In our March Aluminium Market Outlook Update, we portrayed three price scenarios, as shown below. Our upside scenario talked of prices likely to peak over $4,000 /t and a quarterly average of $3,800 in Q2 before trailing off in H2, but at a significantly higher level than our base case. This upside scenario included deeper disruptions to production which are only partly offset with demand being 0.4% pt lower than our current growth rate.
Given the events that occurred over the last weekend in March and acknowledging the huge uncertainty, in terms of the effect on the market balance and hence the price, we think the upside price scenario is increasingly likely to become our base case. Indeed, this is far from a worst-case scenario and, as discussed earlier, there may be further production cuts, in part due to difficulties in getting raw materials through the Strait of Hormuz. Naturally, the higher prices are, the more likely they are to crimp demand and encourage a restart of idled capacity. The impact of disruption in the supply chain has already affected auto wheel makers in Japan and South Korea. For more details see this Insight and image below.
Widespread restarting of idled smelter capacity is unlikely, even at these higher levels, as much of this capacity faces severe challenges. Indeed, this is highlighted by the relative dearth of restarts announced in recent months, with high aluminium and low aluminium prices. In fact, there has been far more closed, rather than restarted, capacity in recent months, e.g. Mozal’s idling, which is perhaps the most likely restart that could significantly impact prices. If this were to occur, we think prices would drop much faster than the upside scenario, shown below.
The Middle East aluminium smelter cuts will likely lead to markedly higher aluminium ingot premiums. These have already escalated in the past month, but last week saw them starting to stabilise. However, for two reasons this will lead to a further significant increase in aluminium ingot premiums. Firstly, and most importantly in the US, the impact of the duty given the rising LME. Secondly, further cuts to supply make the market tighter.
In conclusion, with prices and premiums set to go higher, and economic activity more broadly being impacted, these will represent headwinds for aluminium demand growth. We will continue to monitor the situation over the coming days and weeks, and provide timely updates to our CRU clients on the consequences the Middle East conflict has on supply, demand and prices.
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